AVYA - Why Shares of RingCentral and Avaya Are Soaring Today
Shares of Avaya Holdings (NYSE: AVYA) and RingCentral (NYSE: RNG) both traded up nearly 25% on Friday morning after the two telecom companies announced a broad strategic partnership. The deal is likely not exactly what some Avaya shareholders were hoping for, but it should give both companies competitive advantages over going it alone.
Under the terms of the agreement, Avaya, one of the largest providers of office communications systems, will use RingCentral's cloud technology to run future telecom systems. RingCentral as part of the deal will pay Avaya $375 million in advance sales commissions and licensing rights, as well as invest $125 million in a preferred equity investment that would amount to a 6% stake in Avaya if converted to common stock.
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